Bank Loan Documentation
Preparing and perfecting home loan documents: the facility agreement, the charge or deed of assignment, stamping, and coordination of the loan release.
Legal fees for loan documentation are calculated on the loan amount, not on the property price, using the same scale under the Solicitors Remuneration Order 2023. For a loan of RM450,000 the fee is approximately RM5,625 before service tax, and the loan agreement stamp duty is 0.5%, which is RM2,250.
Where a property purchase is bank financed there are two separate sets of documents. The first is the sale and purchase agreement between you and the seller. The second is the loan documentation between you and the bank.
Each carries its own legal fee, the first calculated on the property price and the second on the loan amount. Many buyers are surprised to see two fee lines in a quotation. That is why.
Charge or deed of assignment
The bank requires security over the property. The form it takes depends on whether individual title has issued.
Where an individual or strata title exists, security is given by a charge registered at the land office. Where the property is still under the developer master title, security is given by a deed of assignment, because there is no separate title capable of being charged yet.
Terms in the letter of offer worth attention
The letter of offer binds you once accepted. Among the terms that most often matter later: a lock-in period imposing a charge if you redeem early, insurance the bank requires you to take, and the conditions precedent that must be satisfied before funds are released.
What your lawyer handles
- Reviewing the letter of offer and explaining the terms that affect you
- Preparing the facility agreement in the bank's format
- Preparing the security document, being a charge where individual title has issued, or a deed of assignment where the property is still under a master title
- Attending to stamping of the loan documents with the Inland Revenue Board
- Presenting the charge for registration at the land office
- Coordinating with the bank for release of the loan to the seller or developer
- Ensuring any insurance required by the bank is in place before release
Timeline
Documents you need to prepare
- Letter of offer from the bank
- Copy of the identity card of the borrower and any guarantor
- Copy of the signed sale and purchase agreement
- Copy of the title, or the original agreement if the property is under a master title
- Details of MRTA or MRTT insurance if required by the bank
Costs people often overlook
- Legal fees calculated on the loan amount, not the property price
- Loan agreement stamp duty at 0.5% of the loan amount
- Land office fee for registration of the charge
- Service tax of 8% on legal fees
- Search and document delivery costs
When to stop and get advice first
- The letter of offer contains terms different from what was described verbally
- The bank requires a guarantor but the implications of the guarantee have not been explained to that person
- A lock-in period that imposes an early redemption charge if you sell or refinance
- The approved loan is lower than applied for, leaving a shortfall you have to fund in cash
Frequently asked questions
Why are there two sets of legal fees?
The sale and purchase agreement and the loan documentation are separate matters with different documents. Fees are calculated separately, on the property price and the loan amount respectively.
What is the difference between a charge and a deed of assignment?
A charge is registered where individual title has issued. A deed of assignment is used where the property is still under the developer master title and no separate title exists to charge.
Can I choose my own lawyer for the loan documentation?
The bank appoints from its panel. If your preferred firm is on that panel, you can ask for that firm to be appointed.
How does Islamic financing differ in terms of documents?
The contract structure differs. Islamic financing typically uses a commodity sale or lease based contract, while a conventional loan uses a loan agreement. The underlying security documents are broadly similar.
How long before the loan is released?
Normally one to two months after the documents are signed, subject to stamping, registration, and satisfaction of the bank's conditions for release.
Ready to start your property matter?
An initial consultation with no obligation. Tell us about your matter and we will explain what is involved and what it is likely to cost.
No. 4, Jalan Setia Impian U13/3D, Setia Impian 3, Seksyen U13, Setia Alam, 40170 Shah Alam, Selangor
014-9723468 · 014-4004293 · Monday to Friday, 9:00am to 6:00pm